Public Bill Committee

[Mr Laurence Robertson in the Chair]

Clause 100 - Required information about partners

Question (this day) again proposed, That the clause stand part of the Bill.

Laurence Robertson: I remind the Committee that with this we are considering the following:
That schedule 4 be the Fourth schedule to the Bill.
Clause 101 stand part.
Clause 102 stand part.

New clause 56—Limited partnerships: registration of persons of significant control—
“(1) The
Secretary of State must by regulations make provision about the
registration of persons of significant control in relation to limited
partnerships.
(2) For the
purposes of regulations under this section, ‘persons of
significant control’ may include persons with a right
to—
(a) 25% or more of
the surplus assets on winding
up,
(b) a voting share of 25%
or more,
(c) appoint or remove
the majority of managers,
(d)
exercise significant influence or control over the business,
or
(e) exercise significant
influence or control over a firm which would be a person of significant
control if it were an
individual.
(3) No regulations
to which this section applies may be made unless a
draft of the statutory instrument containing the regulations (whether
or not together with other provisions) has been laid before, and
approved by a resolution of, each House of
Parliament

Margaret Hodge: I am not going to recap, because we want to make progress, but I hope the Minister is listening. We are talking about a way of improving transparency, accepting that the new clause is not the perfect answer.
English limited partnerships have no directors, but they do have individuals required to sign paperwork, and the formation agencies that help to establish such limited partnerships often hire proxies to do that. A great example of that is Ruth Neidhart, a 71-year-old Swiss national who lived in Cyprus. She is a ceramic artist, she sometimes arranges pottery painting sessions for children’s birthday parties, and she has been signing documents for a formation agency called IOS since at least early 2009. We see that see that she has signed 161 of these ELPs since 2016 and has links to IOS companies in Nevis, the British Virgin Islands, Belize and the Bahamas, all offshore firms that have been used to form UK shell companies.
Alexandru Terna, a 32-year-old Romanian who lives on a busy road junction in west London in what is described as “a modest house”, has signed 306 of these ELPs. He said in an email to Finance Uncovered, which covered the story:
“We worked only with [LAS],”
the formation agent. He added:
“We have never been involved in the management or control of any of these companies or any other company, where we were appointed as signatories.”
I thought that was interesting. Then we have the infamous Moldovan bank fraud, where $1 billion vanished from three Moldovan banks in just two days through limited partnerships—a series of Hong Kong and UK-registered companies. The new owners took over the bank in 2012, buying shares and using funds from UK limited companies.
The Government argue that these limited partnerships are not legally separate from their partners and so they cannot be beneficially owned. However, the person of significant control requirements require control—that is the issue—and not necessarily ownership. There does not have to be separate legal personality and ownership for there to be significant control, and if there is a corporate partner, there must be a human being controlling that corporate partner. The corporate partner cannot exist without somebody controlling it.
The PSC is defined as somebody with more than 25% of assets or more than 25% of voting share, or—this is another aspect of the definition—who exercises significant influence or control over the business. In practice, all the leaked documents we have seen from journalists show that formation agencies routinely create ELPs and issue clients with documents that declare them as beneficial owners, so they use that term anyway; they see them as beneficial owners. Indeed, ELPs also open bank accounts. There is somebody behind them, and we need to try to get to that person.
I accept that what we are proposing is not a perfect answer, but I think it is better than the status quo. We would get nominees putting themselves forward, and we would get company service providers declared as persons of significant control, but the same nominee appearing frequently would be a red flag, and company service providers reappearing in relation to lots of companies would also be a red flag. Remember: transparency is the best disinfectant.

Kevin Hollinrake: I am very pleased to respond to the right hon. Lady’s speech. In relation to some of the issues we have with limited partnerships, she has set out her case very well and fairly.
Through the Bill, we are trying to make it easier for Companies House to spot exactly the kinds of red flags the right hon. Lady has referred to. She mentioned people such as Alexandru Terna. Under this legislation, for the first time, significant penalties will accrue to somebody who does not declare their partners accurately. As I have said on a number of occasions in recent days, I am sympathetic to a number of the right hon. Lady’s amendments, including new clause 56. I understand the reasons why she has tabled it.
The new clause would partially duplicate the Scottish Partnerships (Register of People with Significant Control) Regulations 2017. Scottish limited partnerships have  legal personality, meaning that in the eyes of the law they are a separate legal entity and have distinct duties and liabilities to those of their partners. It is therefore possible to apply persons of significant control requirements to those entities. As the right hon. Lady said, the same is not true of English, Welsh or Northern Irish limited partnerships, which do not have legal personality. Unlike SLPs, those forms of limited partnership register with Companies House but are not a separate legal entity from their partners. The partners are the embodiment of the partnership; as such, legislating for the registration of people who have significant influence or control over an English, Welsh or Northern Irish LP is legislating for the registration of people who control other people. I will return to that point in a second.
Not having legal personality means that limited partnerships cannot own property or assets in their own name; any assets are held in the name of the partners themselves. They are a registrable legal relationship, and can be thought of a bit like a marriage: the act of registering gives the relationship legal force and bestows rights and duties on the partners, but it does not create something separate that can be owned. Like a marriage, a partnership ends on the death of a partner.
It is therefore not legally possible to apply the persons of significant control requirements currently applied to Scottish LPs to English, Welsh and Northern Irish LPs. It would be possible to draft legislation for a different regime applying a different definition of beneficial ownership, but given that the partnership only exists as a business relationship between partners and its body exists in the person of the partners, it is not apparent who, beyond the partners, should be registered. A likely outcome would therefore be all limited partnerships reporting that no person met the requirements, other than those already registered as partners.
Nevertheless, I understand that the intention of the right hon. Member for Barking is to increase transparency about who is managing and controlling a limited partnership. That is why the clauses that we are debating will increase the amount of information that is available concerning the partners of a limited partnership, and place a legal duty on partners to update those details with the registrar. In addition, the identities of all general partners must now be verified, and any corporate general partner must name an individual who may be contacted in relation to the limited partnership and whose identity must also be verified.
Although the right hon. Lady admits that her new clause is not a perfect solution, she has raised a good point. In consultation with her and officials, I will give further consideration to this matter, to ensure that there are no other means by which somebody may have undue control over a limited partnership. I am keen to work with her and discuss how we might do that.

Seema Malhotra: It is a pleasure to say a few words on this topic—we have had a very good and extensive debate on these clauses, so I will limit my remarks.
I think we are in violent agreement that more needs to be done. I made remarks earlier about the extent to which we have seen the misuse of partnerships grow. Research in the past eight to 10 years has shown the growth in the formation of limited partnerships and the  extent to which they are used for economic crime. We have taken a long time to get here, but it is useful and important that we are now at this point.
Schedule 4, which is inserted into the Bill by clause 100, sets out information that must be provided to the registrar by partners who are individuals and corporate bodies in relation to limited partnerships. I think we all support the introduction of these measures as necessary for increasing the information and transparency around who actually owns and controls limited partnerships. As the Minister is responding to the points and questions raised by my right hon. Friend the Member for Barking, I think those points about transparency and how that works across these clauses and the framework of the legislation as a whole are extremely important.
There is a transitional period of six months for compliance after the Bill comes into force, and the Bill provides that non-compliance will be
“treated by the registrar as reasonable cause to believe that the limited partnership has been dissolved”.
We have raised related questions in the course of debate. Although we may recognise the need for a transitional period, why are we waiting six months? What reassurances can the Minister give us that there are adequate safeguards against limited partnerships that have been set up for criminal purposes simply taking no action during the six-month period in order to avoid scrutiny and transparency?
The Minister may refer us to other parts of the Bill where we have discussed what can happen when companies get dissolved. However, we do not want to strengthen the legislation on one hand but, on the other, provide a way for those who have been using these vehicles for years, given the scale of economic crime that the research suggests, to have a “get out of jail free” card because of the time allowed for compliance and the lack of scrutiny of what is happening.
On new clause 56, I am really pleased that the Minister recognises the arguments that have been made, and his openness about wanting to work together. As my right hon. Friend the Member for Barking said, the wording may not be perfect, but let us work together on the solution. That is important if the Committee is to make sure that the legislation is improved prior to its return to the whole House on Report.
I think it is worth saying that those who have given evidence to the Committee will also be looking for changes. There have been numerous reports by the Government themselves highlighting the use and abuse of the limited partnership model for the purpose of economic crime. To give one example, when giving evidence to the Committee, the legal professor Elspeth Berry said of limited partnerships:
“I dread explaining them to my students, because of the difficulty in trying to get at who owns limited partnerships and who is in control of what is going on”.––[Official Report, Economic Crime and Corporate Transparency Public Bill Committee, 27 October 2022; c. 103, Q194.]
Clearly, there is opinion among experts that mirrors the wider concerns that we have heard about the opaqueness of ownership and control information around limited partnerships.
If the Government are truly to clamp down on the use of limited partnerships to commit economic crime, measures such as new clause 56 are a vital part of the  toolkit. I urge the Minister to do what he said he would and take the matter away, but we want something concrete to come back that provides the strongest possible mechanisms and safeguards, and greater transparency about who truly owns and controls limited partnerships and Scottish limited partnerships.

Kevin Hollinrake: It is clear from the number of different things that we have discussed over recent days that we need to work on a number of points to improve the legislation. There is no question about that, and I am grateful to hon. Members for their contributions to that end. The shadow Minister raised the six-month transitional period. Clearly, we are trying to strike a balance between rooting out wrongdoing and ensuring that legitimate organisations have time to provide the information. I think it is a reasonable time period. It may be that something happens as she described, and some nefarious activities are—

Seema Malhotra: Will the Minister consider this a little further in the light of the fact that the Bill’s provisions will not come as a surprise? The Bill has been introduced, there has been Government documentation and consultation, and so on. Might the six months be looked at again in the light of that fact?

Kevin Hollinrake: I was going on to say that I think the period is fair. As the hon. Lady knows from the debate that we have had over recent days, the way the legislation works is that a number of different pressure points are applied to those who are potentially guilty of wrongdoing. The dissolution of a partnership may well be a red flag for Companies House in certain circumstances, together with other information that it may glean, including from the confirmation statements that general partners have to submit—those are combined with criminal sanctions, of course—and information sharing. All those things come together in this holy alliance to clamp down on the opportunities created by limited partnerships and other vehicles that we have discussed. I think it is a fair balance, but I am always happy to continue to debate these things.

Question put and agreed to.

Clause 100 accordingly ordered to stand part of the Bill.

Schedule 4 - Required information

Amendment made: 50,in schedule 4, page164,line1, leave out “registered or”.—(Kevin Hollinrake.)
This amendment would mean that, in relation to the registration of limited partnerships, the required information that must be provided about a partner that is a legal entity includes its principal office in all cases, rather than there being an option to provide its registered or principal office.

Schedule 4, as amended, agreed to.

Clauses 101 and 102 ordered to stand part of the Bill.

Clause 103 - A limited partnership’s registered office

Question proposed, That the clause stand part of the Bill.

Laurence Robertson: With this it will be convenient to consider clause 104 stand part.

Kevin Hollinrake: Currently, limited partnerships must provide a proposed principal place of business only on registration. There is a requirement to notify the registrar if the principal place of business changes, but the penalty is just a fine of £1 per day, which does not effectively deter non-compliance. There are many cases where limited partnerships have not informed the registrar that their principal place of business has changed, meaning that she is unable to notify them of any changes or serve documents on them.
Clause 103 therefore introduces a requirement for general partners to maintain a registered office address that is in the original jurisdiction of registration in the United Kingdom and keep this up to date. This means where the principal place of business changes, including by moving abroad, the registrar still has a UK registered office address on record for the limited partnership. An important attraction of limited partnerships for legitimate businesses is the flexibility to move their principal place of business abroad. The clause therefore retains that flexibility while also ensuring the registrar has an appropriate address in the United Kingdom for contact and potential enforcement purposes.
The clause also sets certain conditions for the address to shore up the limited partnership’s connection to  the UK and allow scrutiny of the limited partnership. For example, the address must be able to be used for communication purposes and it must be possible for the delivery of documents there to be recorded by an acknowledgement of delivery. The address must be either the limited partnership’s principal place of business, the usual residential or office address of a general partner, or the address of an authorised corporate service provider that is acting for the limited partnership.
The general partners of limited partnerships can change the registered office address, but they must inform the registrar of the change and confirm that the new registered office address is an appropriate address. This is a critical part of limited partnership reform. Failure to meet the address requirements will be an offence and may result in a substantial fine. The clause mirrors changes made by part 1 of the Bill to powers for the registrar to move registered office addresses, either on application or on the registrar’s own motion, where the address fails the “appropriate address” test.
Clause 104 extends the requirement to have a registered office address to limited partnerships that were registered before commencement of the Bill. It gives them a period of six months to comply with the new requirements. The end of the transition period will provide the registrar with a point at which to assess which limited partnerships have failed to comply and may therefore be inactive. The registrar can then treat the limited partnership as dissolved and update the register accordingly, which will assist enforcement and compliance activities.

Seema Malhotra: I thank the Minister for his remarks. I have some brief comments to make about clauses 103 and 104 stand part. The Minister has outlined what the clauses do. Clause 103 inserts a new section into the Limited Partnerships Act 1907 that establishes on general partners of limited partnerships a duty to ensure that the firm’s registered office is at all times an appropriate address at which to receive correspondence. The clause introduces a new power for the Secretary of State to make regulations giving the registrar the power to change  a limited partnership’s registered office address. The appropriate address is supposed to be within the original jurisdiction.
While new regulations on the addresses of limited partnerships are needed, Elspeth Berry, a legal expert on limited partnerships, set out in her written evidence to the Committee concerns about this element of the Bill. She said:
“The requirements for an “appropriate” registered office address or email are an improvement but do not guarantee a genuine economic link to the UK…The “appropriate” address for the registered office, and email address, ensure that the address is used with consent, and someone will answer. However, the provisions still lend themselves to maildrops, with no real economic presence. None of the options intended to link an LP to the UK demonstrate a real economic link. Option 1 is apparently already complied with by most rogue LPs already, because they have no real place of business in the UK, so anywhere can be the “principal” place. Option 2, the usual residential address of a partner, can be redacted, so redaction must not apply if it is also chosen as the registered office. Option 3 is the address of a corporate general partner, with all the lack of transparency that entails. Option 4 is an ACSP address, which can be a maildrop.”
Will the Minister respond to those concerns? What assurances have the Government received that the provisions in the clause will genuinely guarantee the economic link to the UK that is intended? If not, will he look again at this part of the Bill? It would be a shame to get to the point of the Bill becoming an Act without it being able to do what is intended.
Clause 104 provides for a six-month transitional period during which the general partners of existing firms must submit a statement specifying the firm’s registered office, per the regulations set out in clause 103. Will it really take six months to specify an address? Is that not something that the Minister can look at? Other provisions of the Bill refer to 28 days, so why this six-month period? Perhaps six months emerged from a consultation as the most effective option, or it has simply been passported into the Bill because that is in alignment with some other regulation. Was it just cut and paste? If, however, not much thought has gone into this transition period, and if there are no downsides to doing so, we have an opportunity to amend,. Again, I will be grateful for the Minister’s response.

Alison Thewliss: I very much agree with the hon. Member for Feltham and Heston. Without rehashing our previous arguments about addresses—checking whether they are real addresses and whether someone can pick up mail there, which requires people going to make such checks—I note the concerns of the Law Society of Scotland that “principal place of business” could still be a bit unclear. It points out in its briefing that a number of other concepts already exist in legislation, such as “head office”, “establishment” or “centres of main interest”. That makes things confusing and more easy to get around if people wish to do so.
The society believes that another issue has emerged, in part owing to covid: not everybody has a principal place of business as we used to understand it—a head office with a sign above the door. That is what we were used to seeing, but now that people work remotely, sourcing a principal place of business might become more difficult. Businesses have adapted, so it will be useful to understand from the Minister whether such  things will be caught by the legislation. Someone might not have a traditional headquarters in the old way, and so might not be caught by the legislation. I seek his assurance about the intention of the Bill.
The Law Society of Scotland briefing also points out that members of a management team might not all be based in the same location; they might be working remotely or in different countries around the world. Again, sourcing that person who has responsibility at a principal place of business has become a little murkier as a result of changes in working practices. We need to ensure that legislation keeps pace with that and that there is not a workaround for those who want to avoid scrutiny.

Kevin Hollinrake: A few minor points have been made additional to the ones that have been discussed before. The shadow Minister, the hon. Member for Feltham and Heston, asked about the corporate general partner. Clearly, there is still a person behind a corporate general partner—an officer has to register their identity behind the corporate general partner, so there is an actual person behind it.
The shadow Minister also referred to the six months. As I said, I think that is a reasonable period, but she might think differently and seek to amend it on that basis. To me, it is not just about the time period, but about the other points—the foundations of the Bill, which are the sanctions, the red flags and the sharing of information. Those are the important things. The downside she mentioned is the impact on legitimate businesses, for which the time period may not be sufficient.
Clearly, there is a link to the UK in terms of how the entity is established. The limited partnership is established and has to maintain its registered address. I do not think that any of these measures contain a requirement to have an economic link to the UK, but I will discuss that with officials.

Margaret Hodge: The Minister said earlier something that I did not think was the case. I thought that corporate general partners did not have to register the person behind the company. That is the problem: people register the company without registering the person.

Kevin Hollinrake: No, that is not the case.

Margaret Hodge: Are you sure?

Kevin Hollinrake: Absolutely, although I will clarify that with my officials. We discussed this issue before. I will confirm it later today, if I can, but I am sure that that is the case.
There is no requirement to have an economic link. The link is with the person, the general partner and the limited partners, and the UK-based address. That is the link to the UK that these measures seek to ensure.

Question put and agreed to.

Clause 103 accordingly ordered to stand part of the Bill.

Clause 104 ordered to stand part of the Bill.

Clause 105 - A limited partnership’s registered email address

Question proposed, That the clause stand part of the Bill.

Laurence Robertson: With this it will be convenient to discuss clause 106 stand part.

Kevin Hollinrake: The two clauses mirror the provisions in clauses 30 and 31, which we debated previously. They apply to limited partnerships the registered email requirements introduced for companies. Clause 105 requires limited partnerships to have a registered email address. The email address must be “appropriate”, which means that
“in the ordinary course of events, emails sent to it by the registrar would be expected to come to the attention of a person acting on behalf of the limited partnership.”
Clause 106 provides for a transition period of six months for existing limited partnerships to provide an appropriate email address to the registrar. If, at the end of six months, a limited partnership has failed to supply an appropriate email address, the registrar will have reasonable cause to believe that the limited partnership is dissolved. That will mean that the confirmation of dissolution process, which we will debate later, is open to the registrar, who may consequently move to deregister the limited partnership.

Seema Malhotra: It is a pleasure to speak to clauses 105 and 106. As the Minister said, clause 105 inserts new provisions in the Limited Partnerships Act 1907. The new measures provide that all general partners must maintain an appropriate email address. The Minister has probably outlined this before, but it is helpful to consider what we mean by “appropriate”. Email addresses can be anything—for example, mylp@gmail.com—or they could be more robustly connected to an entity. Will the Minister say anything further about the definition of an appropriate email address? Is it just one that works and to which somebody responds in the end? A failure to comply would be an offence, and it is right that a general partner could face a fine.
Clause 106 gives the general partners of a limited partnership a six-month transition period in which to submit their email addresses to the registrar and comply with the provisions introduced by clause 105. I think the Minister knows exactly what my concerns are about how long it can take to register an email address with the registrar. The most honest businesses and those doing the best are probably more likely to comply more quickly. Again, I make the point that it feels as though six months is an extremely long time for limited partnerships to comply with these new measures.

Kevin Hollinrake: The hon. Lady asked about the definition of an appropriate email address. As I said, it is an appropriate email address if emails sent to it would be
“expected to come to the attention of a person acting on behalf”
of a limited partnership. I think that is pretty clear—it has to be an address that can receive emails and to which somebody can respond.
On the question asked by the right hon. Member for Barking, where the partner is not an individual but a firm or body corporate, information is also required on the individuals involved in the management of those firms. That includes making sure that there is a named contact.

Question put and agreed to.

Clause 105 accordingly ordered to stand part of the Bill.

Clause 106 ordered to stand part of the Bill.

Clause 107 - Restrictions on general partners

Question proposed, That the clause stand part of the Bill.

Laurence Robertson: With this it will be convenient to discuss the following:

New clause 49—Requirement for all company directors to be natural persons—
“The Secretary
of State must, on a date no later than 31 March 2023, make regulations
to bring into force section 87 of the Small Business, Enterprise and
Employment Act 2015 (Requirement for all company directors to be
natural
persons).”
This new clause would bring into effect provisions of the Small Business, Enterprise and Employment Act 2015 enabling a ban on the designation of a company as the beneficial owner of another company, requiring all company directors to be “natural persons”.

New clause 57—Limited Partnerships required to have at least one partner who is a natural person—
“(1) A limited
partnership must have at least one partner who is a natural
person.
(2) This requirement is
met if the office of partner is held by a natural person as a
corporation sole or otherwise by virtue of an
office.
(3) For the purposes of
this section, “limited partnership” includes Scottish
limited partnerships and limited partnerships in Northern
Ireland.”

New clause 58—Limited Liability Partnerships required to have at least one member who is a natural person—
“(1) A limited
liability partnership must have at least one member who is a natural
person.
(2) This requirement is
met if the office of member is held by a natural person as a
corporation sole or otherwise by virtue of an
office

Kevin Hollinrake: Clause 107 requires a limited partnership to confirm on application for registration that none of its general partners are disqualified under directors disqualification legislation. It also introduces a duty on all general partners of a limited partnership to take any steps necessary to remove a disqualified general partner on pain of criminal sanction for failure to take those steps.
General partners are responsible for the management of limited partnerships, including the movement of funds. There is currently nothing in place to remove a general partner from a limited partnership once they become disqualified. The clause is needed to ensure that disqualified individuals are prevented from being general partners of a new limited partnership set up after the Bill and to ensure that existing general partners of  extant firms who become disqualified, or already are when the Bill comes into force, cease to be a general partner.
New clause 49 would require the Secretary of State to make regulations under section 87 of the Small Business, Enterprise and Employment Act 2015, which amended the Companies Act 2006 to require all company directors to be natural persons, with the power to make exceptions in regulation. I have every sympathy with the intention of the amendment, which challenges the Government to act on something they have long promised. I am happy to commit to the Committee that such regulations will be made soon.

Stephen Kinnock: Is that like shortly?

Kevin Hollinrake: Very similar. It is sooner than shortly. The ban on the appointment of corporate directors will not and should not be absolute. That is why the Companies Act provides for a delegated power to create exemptions by regulations. Those regulations will address the limited circumstances under which a company will be permitted to have a corporate director. It is important that those regulations are in force before we ban the appointment of any corporate directors and are aligned with the new reforms proposed in the Bill.

Margaret Hodge: I am grateful, thinking about my new clause, because it sounds like there might be movement on that. I want to ask the Minister a difficult question: what are the legitimate reasons for limited liability partnerships to have a corporate member? What on earth is a legitimate reason? I cannot think of one.

Kevin Hollinrake: It might be an investment fund. It might be an insurance company or a collective around investment funds that derive returns for our pensions for millions of people up and down the country. It may well be that a corporate body is part of that limited partnership. I think that is perfectly reasonable, and I imagine we would expect that to be the case.

Margaret Hodge: Even in that case, why not have a natural person—a named individual? I just do not get it.

Kevin Hollinrake: That is exactly what we have. Does the right hon. Lady mean in terms of companies, or in terms of limited partnerships?

Margaret Hodge: Yes, in companies; no, I mean in limited partnerships. Apologies.

Laurence Robertson: Order. We cannot have a general conversation. The person speaking is the person I call to speak—at the moment, that is the Minister.

Kevin Hollinrake: I am happy to give way, for clarification.

Margaret Hodge: Apologies to you, Mr Robertson. I got carried away. I am talking to limited liability partnerships. I cannot see the point of hiding behind a corporation rather than having a natural person.

Kevin Hollinrake: There is a bit of confusion generally about the difference between limited partnerships and limited liability partnerships. I think we are talking about limited partnerships here.

Margaret Hodge: Yes.

Kevin Hollinrake: A named individual will be required for corporate partners—namely, a registered officer. I made that commitment earlier in the debate. I hope the right hon. Lady will be reassured on that point.

Seema Malhotra: On a point of clarification, the Minister just talked about limited partnerships, where a named individual is required. I know this is confusing. Would the situation be the same in relation to limited liability partnerships?

Kevin Hollinrake: Yes, as I understand it, but I will get clarification on that.

Margaret Hodge: I am trying to think this through properly: I may be wrong. In the circumstances where the corporation is offshore—an offshore company owns it—would there have to be a natural person named?

Kevin Hollinrake: Yes. There is no distinction between companies or corporate partners operating offshore to those that are operating onshore. There will be a registered officer in all circumstances.
The regulations will address the limited circumstances under which a company will be permitted to have a corporate director. It is important that the regulations are in force before we ban appointment of any corporate directors, that they are aligned with the new reforms proposed in the Bill and, most importantly, that identity verification of the officers of the corporate director can be carried out.
It is the Government’s intention that any corporate director be as transparent and accountable as a natural person and therefore we intend to make our corporate director regulations come into force alongside the regulations enabling identity verification. Introducing those regimes will be one of the implementation priorities post Royal Assent. I repeat my commitment to the Committee that the regulations will be brought forward.
I understand that the intention of new clause 57 is to ensure that limited partnerships should always have a partner who is a natural person, in order that the person might be contacted in relation to that limited partnership’s activities. Clause 108 inserts proposed new section 8K into the Limited Partnerships Act 1907: the new section places a duty on limited partnerships to have a registered officer who is a natural person for any general partner who is a legal entity and goes on to place strict duties for notifying any changes to that person to the registrar.
The duty in the proposed new section applies only to general partners and not all partners because limited partners are not permitted to engage in management activities. The objective of the new clause in the name of the right hon. Member for Barking would not be met if a limited partnership’s only natural person was a limited partner, because they would not be permitted to correspond with or act in relation to a notice from the registrar.
New clause 58 targets the misuse of limited liability partnerships in opaque corporate structures. While I sympathise with the intent, I cannot support the new clause. UK limited liability partnerships have been named in a number of international money laundering scandals. Many of those will have partners that are solely corporate structures. I am concerned about the abuse, but just as with companies, there can be legitimate reasons why a  limited liability partnership might have all corporate partners. For instance, an investment company might a manage a pension fund for a limited partnership. The investment company would be the general partner and manage investments for the limited partners, which generate pension income. It is important for us to get the balance right.
We will extend the requirement for identity verification to limited liability partnerships through secondary legislation. Where a limited liability partner is a corporate entity, we will require it to name a managing officer who must have their identity verified. I think that confirms the point that the hon. Member for Feltham and Heston just raised. Registrations of corporate members that are not accompanied by a verified person in a management position will be rejected. The Government will also consider whether any further restrictions on the use of corporate members’ LLPs will help to mitigate the risk of misuse without affecting the legitimate use of these structures, particularly in the investment sector.
I look forward to hearing the Opposition’s views in due course. I trust that my explanation and assurances will satisfy the Committee and that the new clauses will be not be pressed to a vote.

Margaret Hodge: That was a very useful contribution, and I thank the Minister. Through these new clauses we are simply trying to strengthen transparency so we know who is behind the corporates structures. Before the Minister was in his post, the Government themselves cited in their White Paper on corporate transparency three massive scandals: the Azeri scandal, Danske Bank and the Moldova bank fraud. All of those involved limited partnerships or limited liability partnerships, which have the features of a corporate entity acting as a partner and were located offshore in one of the secrecy jurisdictions. We are trying to get at that with these new clauses. If we have not got them quite right, I look forward to the Minister coming forward with other propositions.
It is the opaque corporate structures that hide the true identity of the individual who owns or controls a company. That is a classic way that bad people hide their dirty money. This is not an exception—I know that the Minister likes to sometimes say that, but the recent Transparency International analysis of limited liability partnerships found that one in 10 had the identical characteristics to entities that are involved in serious financial crime. That is quite high, and just another red flag. These companies were a newly formed identity, entered immediately into deals and laundered the money or were suspected of laundering the money. Very shortly after the wrongdoing, they closed the company. An awful lot of times I have come across companies with no financial history. They never submit any accounts to HMRC and claim that they have no assets in the accounts. A company might be using nominees and secret offshore jurisdictions, which we have talked about.
The other interesting thing in the Transparency International evidence, which the Minister might want to reflect on, is that out of the 1,532 companies that they  looked at, 94% had at least one corporate partner with a registered address in one of 21 high-risk jurisdictions—the BVI, Belize and so on. I like to have these little stories to tell: there is the bottle laundromat that the Minister will know well, which ended up with £750 million being laundered out of Russia, stolen from the Russian people between 2014 and 2016. Some 130 companies were used. They falsified sales to Russia of bottle-making machines. They never really produced the machines, but in paying for them, they got the money out of Russia. There were three UK LLPs, all of which had two or more offshore corporate partners from one or more high-risk jurisdictions behind them.
This is not an insubstantial problem: it is a big problem. These are not just exceptional occurrences; they occur with too much frequency. What we are trying to do here is not a silver bullet, but we think it is part of the jigsaw that needs to be put together to improve transparency and therefore make things more difficult for people who engage in money laundering and other crime and for people to hide who they are. We are just saying that one natural person should be listed on the board. I am a bit unclear as to whether our proposal would actually achieve that or whether there are other ways of getting to the same objective, one that I think we probably share. I do not know why—I find it a bit odd—we in the UK are offering UK legal protection and privileges, things like limited liability or the rule of law, and sort of by accident we are offering anonymity to people offshore who are not in the least bit troubled by UK law, because they are completely beyond its reach. It seems to me that the current structure enables that to happen.
The new clauses would ensure that partners or members could no longer hide behind offshore corporate partners and members without a named individual being on the line for—held to account for—any wrongdoing. We will still, I know, get nominee directors. Trust and company service providers will still put themselves forward as the named people, or people working in TCSPs will still do it. But I think that this proposal would help with raising red flags and enabling Companies House to focus its activity on those areas where there is the greatest danger.

Seema Malhotra: It is a pleasure to speak to these measures. We have had quite an extensive debate, so I will make just some limited remarks on clause 107 and new clauses 57 and 58. Clause 107 is a very important clause, inserting a requirement on registration for confirmation that a limited partnership’s proposed general partners are not disqualified under the director’s disqualification regime. It also inserts, under proposed new section 8J, a new duty to take steps to remove a general partner who is disqualified. If general partners fail to do that, they will be liable to an offence.
Those requirements are extremely important. I think that some of the debate is just on where some measures perhaps do not go far enough. In summary, we support the arguments made by my right hon. Friend the Member for Barking on new clauses 57 and 58.
I want to read out another contribution from Professor Berry. I think it is important to keep these contributions on the record in our discussions—recognising as well some of what the Minister has said. As Professor Berry set out in her written evidence to the Committee about the issue of corporate directors, ascertaining an individual  acting as a director through a body corporate is certainly more opaque than if the director is just a natural person. The situation is very confusing, but I will read out what the professor said. She stated that
“the concept is demonstrably open to abuse, a ban”
on corporate directors
“was originally proposed in the interests of accountability and transparency, and a legal entity is incapable itself of carrying out the functions or duties of a director…Not only are corporate partners/LLP members a significant feature of wrongdoing…the attempts in the Bill to trace an individual somewhere behind them are so complex as to be unworkable in practice…impossible in practice for CH to check, and an obvious route for obfuscation by wrongdoers. E.g the concept of a named officer or of a managing officer of a corporate partner (and presumably of an LLP member), compounded by the fact that a named officer’s residential address can be redacted and they need not supply a service address.”
As the Minister reflects on our discussions and how we move forward, he should bear in mind the concerns raised by Professor Berry. Whatever is brought forward by the Government—however they have reconsidered it, and tested what it will do and mean in practice—does it pass the Professor Berry test, and meet the challenges that have been put to us regarding the legislation and what could otherwise slip through the net?

Kevin Hollinrake: I think it passes that test; it certainly seems to pass the test of the new clause tabled by the right hon. Member for Barking. In her remarks, she said that we are just looking at one person behind that corporate entity: that is exactly what we are achieving through the regulations, making sure that there is an actual person—a registered officer, a managing officer—who sits behind any corporate entity. That person will be verified, with a UK address. The TCSPs within those organisations, to which the right hon. Lady referred, will also have their identify verified, and anyone who is found guilty of false filing could face significant fines and jail sentences. I think the Bill achieves what she has set out, but as I said in my earlier remarks, I am happy to consider what further restrictions on those corporate entities might be appropriate.

Question put and agreed to.

Clause 107 accordingly ordered to stand part of the Bill.

Clause 108 - Officers of general partners

Kevin Hollinrake: I beg to move amendment 18, in clause 108, page 86, line 32, at end insert
“, and
(b) confirming that the proposed
registered officer meets the requirement in section 8K(1)(c)(i) or
confirming that the proposed registered officer meets the requirement
in section
8K(1)(c)(ii).”
This amendment would require each general partner that is a legal entity to state, in an application for registration of a limited partnership, whether its registered officer is identify verified or exempt.

Laurence Robertson: With this it will be convenient to discuss the following:
Government amendments 19 to 24, 26 to 28, 37 and 41.

Government new clause 9—National security exemption from identity verification.

Kevin Hollinrake: Amendments 18 to 24 and 26 to 28 make changes to clauses 108 and 111 of the Bill to extend identity verification requirements to registered officers of corporate general partners of limited partnerships. General partners will be required to confirm whether their registered officer is identity-verified or exempt when registering a limited partnership, becoming a general partner, changing a general partner, or changing the registered officer. A failure to do so will result in those general partners committing an offence. Each proposed registered officer will also be required to confirm whether they are identity-verified or exempt. The corporate general partner will be required to maintain a registered officer, who will have to be verified at all times unless exempted from those requirements.
The other amendments in the group mirror the changes made by clauses 64 and 65, the principles of which we have already debated. They include allowing the Secretary of State to make regulations setting out exemptions to the ID verification requirement. Exemptions may be warranted: for example, where it would not be appropriate to require a registered officer who has already undergone sufficient checks as part of their appointment process to verify their identity. Similarly, the amendments also mirror the regulations requiring statements about identity verification to be accompanied by other statements or other information; making statements relating to ID verification unavailable for public inspection; and introducing an identity verification exemption on the grounds of national security, or to prevent serious crime.

Seema Malhotra: We will keep our comments on this first group of amendments very brief. Broadly, we support these amendments. I would like clarification on a couple of points about amendments 22 and 37 and new clause 9.
Amendment 22 makes regulations providing for exemptions from identity verification requirements subject to the affirmative resolution procedure. Will the Minister expand on in what instances it might be necessary for proposed officers to be exempt from identity verification requirements? He gave an example of a person who has already gone through some identity verification process, so is it more a case of people not having to go through similar processes again? Is that what the Minister intended? Will there be any safeguards so that there is no abuse of the exemptions process?
New clause 9 allows the Secretary of State to exempt a person from certain requirements that relate to identity verification if they are satisfied that doing so is necessary for national security-related reasons. That takes me back to our previous discussions about whether the use of that power will be flagged, without going into unnecessary detail, and through what route? Will the use of exemptions be reported in a report to Parliament or to the Intelligence and Security Committee of Parliament, or to the Intelligence and Security Committee on Privy Council terms? A report might even include just the number of instances, as that would enable some controls and transparency around the use of these powers by the Secretary of State.

Kevin Hollinrake: The hon. Lady is quite right. Exemptions might be applied where somebody’s identity can be confirmed without verification. An example  could be a director appointed by the community interest companies regulator under section 45 of the Companies (Audit, Investigations and Community Enterprise) Act 2004. The CIC regulator and its office is part of a Government Department that is co-located within the registrar. That is simply to ease the burden of bureaucracy where unnecessary.
We expect the powers to be used very rarely. We discussed the matter at length earlier in our proceedings and we do not think there is any reason to go further than that at this point in time. I am sure it is a matter for further debate as we progress.

Amendment 18 agreed to.

Amendments made: 19, in clause108,page87,line11,at end insert
“, and
(ii) confirming that the individual meets the requirement in section 8K(1)(c)(i) or confirming that the individual meets the requirement in section 8K(1)(c)(ii).”
This amendment would require each proposed registered officer to confirm, in an application for registration of a limited partnership, whether they are identify verified or exempt.
Amendment 20, in clause108,page87,line24,leave out “and”.
This amendment is consequential on Amendment 21.
Amendment 21, in clause108,page87,line26,at end insert
“, and
(c)
either—
(i) is an individual whose identity is verified (within the meaning of section 1110A of the Companies Act 2006), or
(ii) falls within any exemption that may be specified by regulations made by the Secretary of State for the purposes of this sub-paragraph.”
This amendment would require a general partner’s registered officer to be identity verified or exempt.
Amendment 22, in clause108,page88,line22,at end insert—
“(7) Regulations
under subsection (1)(c)(ii) are subject to the affirmative resolution
procedure.”
This amendment makes regulations providing for exemptions from identity verification requirements subject to the affirmative resolution procedure.
Amendment 23, in clause108,page88,line33,leave out from “partner” to end of line 35 and insert—
“(i) confirming that the new registered officer meets the requirements in section 8K(1)(a) and (b), and
(ii) confirming that the new registered officer meets the requirement in section 8K(1)(c)(i) or confirming that the new registered officer meets the requirement in section 8K(1)(c)(ii), and”.
This amendment would require a general partner, when changing its registered officer, to specify whether its new registered officer is identify verified or exempt.
Amendment 24, in clause108,page88,line38,at end insert
“, and

(ii) confirming that the individual meets the requirement in section 8K(1)(c)(i) or confirming that the individual meets the requirement in section 8K(1)(c)(ii).”—(Kevin Hollinrake.)
This amendment would require a new registered officer to confirm whether they are identify verified or exempt.

Kevin Hollinrake: I beg to move amendment 25, in clause108,page91,line6,at end insert—
“8PA Regulations
about change of registered officers’ addresses by
registrar
(1) The Secretary of
State may by regulations make provision authorising or requiring the
registrar to change a registered service address of a registered
officer of a general partner if satisfied that the address does not
meet the requirements of section 1141(1) and (2) of the Companies Act
2006.
(2) In this
section—
‘registered officer’ has the meaning given by section 8K(3);
‘registered service address’, in relation to a registered officer, means the address for the time being shown in the register as the registered officer’s current service address.
(3) The regulations
may authorise or require the address to be changed on the
registrar’s own motion or on an application by another
person.
(4) The
regulations—
(a) may
include provision corresponding or similar to any provision that may be
included in regulations under section 1097B of the Companies Act
2006;
(b) must
include—
(i) provision about appeals corresponding to the provision that must be included in regulations under section 1097B by virtue of subsections (7) and (8) of that section;
(ii) provision corresponding to subsection (9) of that section.
(5) Regulations under
this section are subject to the affirmative resolution
procedure.”
This amendment confers a regulation-making power to enable the registrar to change the registered service address of a registered officer of a general partner in a limited partnership.

Laurence Robertson: With this it will be convenient to discuss the following:
Government amendment 29.
Clause 114 stand part.
Government amendments 31, 35 and 36.

Kevin Hollinrake: Amendments 25, 29, 31, 35 and 36 aim to bring about alignment between companies and limited partnerships legislation. Amendments 25 and 29 enable the Secretary of State to make regulations that empower the registrar to take action to move a service address of a general partner, or a registered officer of a general partner, where it does not meet the requirements as set out in legislation, or where it is not the service address of the individual. Those two secondary legislation powers are sufficiently broad that the provisions in clause 114, which provide the registrar with a more narrowly drawn power to move service addresses, are no longer needed. Clause 114 should therefore not stand part of the Bill.
Amendments 31 and 36 are consequential on the fact that proposed new section 10A of the Limited Partnerships Act 1907 is no longer needed, and they remove cross-references to it. Amendment 35 ensures that when the registrar receives an application to change the service address, she will be prevented from making that information available for public inspection. The registrar will, however, have to make available for public inspection any court order or direction to change a service address.

Seema Malhotra: We broadly support the amendments. Clause 114 inserts a proposed new section into the Limited Partnerships Act 1907 that would give the registrar the power to change the service address of a relevant individual. Amendments 25 and 29 confer a regulation-making power to enable the registrar to change the registered service address or principal office address of a general partner in a limited partnership. Although we do not oppose the amendments, I would be grateful to understand why they are regulation-making powers. If there is a basis for legislating for the regulations, why are they not in the Bill? Is it just a case of creating the provisions now? It would be helpful to understand that.
Amendment 35 would mean that
“any application or other document delivered to the registrar under section 8PA, 8G or 8V (changes of addresses by registrar) other than an order or direction of the court”
would be unavailable for public inspection. What information will that cover? In the light of the transparency arguments being made, would any relevant information not be publicly available? As the Government have tabled a lot of amendments, it would be helpful to slightly disentangle some of their implications.

Kevin Hollinrake: I am grateful to the hon. Lady for her points. On why the amendments confer regulation-making powers, as she knows, regulations give us flexibility to change things more easily. The provisions of the regulations are probably moveable feasts. It is sensible not to have them in the Bill, but to be able to learn and change areas as we go along.
Amendment 35 would prevent documents relating to changes of address by the registrar under new powers from being made available for public inspection. If I can, I will get back to the hon. Lady later in the debate about the particular circumstances she described.

Amendment 25 agreed to.

Amendment made: 26, in clause108,page91,line6,at end insert —
“8PB
Registered officers: statements about exemption from identity
verification
(1) The Secretary
of State may by regulations make provision requiring a relevant
statement delivered to the registrar to be accompanied by additional
statements or additional information in connection with the
subject-matter of the relevant
statement.
(2) In this section
“relevant statement” means a statement under any of the
following provisions that confirms that a general partner’s
registered officer falls within an exemption from identity
verification—
(a)
section 8A(1C)(b) or
(1F)(c)(ii);
(b) section
8L(3)(a)(ii) or (b)(ii);
(c)
section 8Q(4)(b) or
(7)(c)(ii);
(d)
section109(2)(a) or113(2)(a) of the Economic Crime and Corporate
Transparency Act 2022.
(3)
Regulations under this section are subject to the affirmative
resolution procedure.”—(
This amendment allows the Secretary of State to make regulations requiring statements about identify verification to be accompanied by other statements or information. It mirrors the amendment to the Companies Act 2006 made by clause 64 of the Bill.

Question proposed, That the clause, as amended, stand part of the Bill.

Laurence Robertson: With this it will be convenient to discuss clause 109 stand part.

Kevin Hollinrake: When registering a limited partnership, the names of the general partners are currently required. Not all general partners are individuals; they can instead be a business entity. That means there is often no named individual associated with that general partner or indeed the partnership. Clause 108 introduces a requirement for general partners that are legal entities to provide a registered officer for that entity. As I set out earlier, general partners must ensure that their registered officers are individuals and have had their identity verified. The clause also requires general partners that are legal entities with one or more corporate managing officers to have a named natural person contact for each of those corporate managing officers.
The measures will increase transparency of the partnership activity by further identifying who is involved in the chain of management. They also ensure that the registrar has a point of contact for the general partner for compliance and enforcement purposes. General partners who are legal entities are responsible for keeping that information up to date. If they fail to comply, they are liable for an offence and a substantial fine. That could also fall on any managing officers who are in default.
Clause 109 introduces a six-month transition period within which existing partnerships’ general partners that are legal entities must bring themselves into compliance by submitting a statement to the registrar setting out those details. That allows the register to be brought up to date while giving sufficient time for general partners to submit the required information without being immediately liable to an offence.

Seema Malhotra: Clause 108 amends the Limited Partnerships Act 1907 by inserting provisions, as outlined by the Minister, that set out that general partners that are legal entities must specify the name or names of a proposed registered officer. That will make it possible to contact an individual person in general partners that are legal entities.
We have had some broad debate on the matter, but we have no objection to clause 108, which is welcome. Obviously, questions about transparency go further, but we welcome and support the clause.
Clause 109 relates to the transitional provisions. We understand the need for that, but the Minister will know my views on the six months.

Clause 108, as amended, ordered to stand part of the Bill.

Clause 109 ordered to stand part of the Bill.

Clause 110 - Removal of option to authenticate application by signature

Question proposed, That the clause stand part of the Bill.

Kevin Hollinrake: Clause 110 removes the option to authenticate limited partnerships registration applications, as well as applications for designation as a private  fund limited partnership, by signature. A signature, which is something readily forged, is no longer a necessary requirement as the Bill introduces other means of electronic authentication to ensure the correct delivery of documents to the registrar by authorised persons. Those means will be robust, secure and effective. Furthermore, other similar provisions that require general partners to deliver documents   to the registrar, such as confirmation statements, do not require a signature. The clause therefore creates alignment across the Limited Partnerships Act.

Seema Malhotra: This clause amends the Limited Partnerships Act by removing the need for a signature when applying for registration of a limited partnership, as the Minister outlined along with the reasons for that. It aligns with new provisions set out in the Bill that impose obligations on general partners to deliver statements and other documents that do not require a signature. I will welcome assurances from the Minister that the Government have carried out some analysis of whether the removal of the option to authenticate an application by signature will have any impact on the effectiveness of the registrar in detecting or preventing economic crime. I will be grateful for that, for the background and for the possible impacts of the measure.

Kevin Hollinrake: As I said, a wet signature is not the key to preventing inappropriate filing documents or inappropriate use of any kind of entity, be it a limited partnership or a company. We are in the modern age now, when many of us approve documents through electronic means. The key to ensuring that we have a register that has integrity and is correct is in the other measures, as we have set out many times.

Seema Malhotra: I understand what the Minister is saying about a wet signature depending on the circumstance, but a lot of documents can be signed electronically but still with a signature. I want to clarify, given the total removal of a wet signature, whether something can be signed electronically and in what circumstances. I know of a situation in which some signatures were put on documentation fraudulently, and that is now being uncovered as evidence of a fraud that took place.

Kevin Hollinrake: The clause does remove the option of a wet signature. It means that electronic means are fine, which already applies to companies. The key to uncovering an undoing, with a wet signature or not, is the other measures in the Bill: sharing of information, sanctions for false filing of documents, criminal sanctions and all those other measures that we discussed by which we can identify wrongdoing and take action against those who are culpable.

Question put and agreed to.

Clause 110 accordingly ordered to stand part of the Bill.

Clause 111 - Notification of information about partners

Amendments made: 27, in clause111,page92,line34,at end insert—
“,
and
(b) confirming that the
proposed registered officer meets the requirement in
section 8K(1)(c)(i) or confirming that the proposed registered officer
meets the requirement in section
8K(1)(c)(ii).”
This amendment would require a new general partner which is a legal entity to confirm whether its proposed registered officer is identify verified or exempt.
Amendment 28, in clause111,page93,line17,at end insert—
“,
and

(ii) confirming that the individual meets the requirement in section 8K(1)(c)(i) or confirming that the individual meets the requirement in section 8K(1)(c)(ii).”—(Kevin Hollinrake.)
This amendment would require the proposed registered officer for a new general partner which is a legal entity to confirm whether they are identify verified or exempt.

Seema Malhotra: I beg to move amendment 162, in clause111,page95,leave out lines 22 to 24.
This amendment would remove the provision for it to be a defence for a person charged with an offence under this section to prove that they reasonably believed that notice had been given under proposed section 8Q of the Limited Partnerships Act 1907.
It is a pleasure to move the amendment, which I tabled with the hon. Member for Aberavon. The clause inserts new sections into the Limited Partnerships Act requiring general partners to notify the registrar of changes to a limited partnership’s partners and information about partners, and changes occurring between an application and the limited partnership’s registration. It also inserts offences for failing to notify information about partners. If the limited partnership does not notify Companies House of notifiable changes within 14 days of a change occurring, the limited partnership will have committed an offence. We have concerns about certain provisions in the clause, which is why we tabled the amendment.
As Professor Berry, a legal professor, set out in her written evidence submitted to the Committee:
“The Bill should not provide a defence if a general partner reasonably believed notice of their appointments had been given to the Registrar… General partners are personally liable for the acts of one another…and are jointly responsible for registering/filing notice of appointment. If they themselves fail to register/file, they should be required to wait to see a change on register. Reasonable belief would provide a loophole.”
That is a significant point. If the Minister is unable to support this amendment or to commit to looking at this more closely and coming back to the Committee, I ask him to identify whether and where Professor Berry is wrong in her written evidence or in the concerns she raised. What assurances has he received, what questions has he asked of officials, and what advice has he taken that this defence does not merely create an unnecessary loophole through which regulations can continue to be abused?
In the interests of ensuring that the legislation is as robust as possible, I urge the Minister to accept this amendment. I look forward to his response.

Kevin Hollinrake: On the hon. Lady’s point relating to amendment 35 regarding an address that might be removed from public view, a person could apply to the registrar because their address has been fraudulently registered as that of a general partner. Amendment 35 would mean that the person’s application was not visible to the public, therefore protecting the applicant. That is the sort of circumstance in which the registrar would use that power.
Clause 111 makes it an offence for a person to act as a general partner of a limited partnership if the registrar has not been notified that the person has become a general partner with 14 days of their appointment. A general partner who manages the firm without that notification having been given on time but in the reasonable  belief that notification was given has a defence to prosecution. Amendment 162 would remove that defence, making the person strictly liable despite their reasonably held belief. General partners who deliberately fail to comply with the requirement to notify the registrar of their appointment should of course be punished for that offence. In the example that the hon. Lady raises, it may well be that if other general partners were guilty of not properly submitting information, they may be guilty of that offence too. The registrar would make a decision accordingly.
Notwithstanding that the Bill creates these offences, in our view the general partner should not be liable for the offence if they have acted on the basis of an objectively reasonable belief. Examples of circumstances in which a general partner might reasonably, but mistakenly, believe that notification of their appointment had been given might include where a general partner has asked its authorised corporate service provider to submit the application, which has been delayed in circumstances beyond the general partner’s control and without their knowledge, or where there has been a technical hitch of which they were unaware—for example, if the information was being supplied electronically. I therefore ask that the amendment be withdrawn.

Seema Malhotra: I thank the Minister for his response. There might be a question about whether confirmation is received or one can go online and check. The Minister’s response does not seem as robust as I was expecting or hoping in relation to this as a potential loophole.

Kevin Hollinrake: Sometimes in life, things happen and it may well be that they are not drawn to the attention of the general partner. The hon. Lady may think there should be a requirement on the general partner to check that the record has been properly made. It is a reasonableness defence. We expect the registrar to use her judgment in the exercise of any decision about whether an offence has been committed. We may need to agree to disagree on this particular point.

Seema Malhotra: I am not going to press the amendment to a vote, but I do think this is something we should come back to. If the risk is a serious one, we need to take it seriously. I will look to how we might progress this issue through the future stages of the Bill. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment made: 29, in clause111,page95,line45,at end insert—
“8V Regulations
about change of general partner’s addresses by
registrar
(1) The Secretary of
State may by regulations make provision authorising or requiring the
registrar to—
(a) change
a registered service address of a general partner in a limited
partnership if satisfied that the address does not meet the
requirements of section 1141(1) and (2) of the Companies Act
2006;
(b) change the address
registered as the principal office of a general partner in a limited
partnership if satisfied that the address is not in fact their
principal office.
(2) In this
section—
‘address registered as the principal office’, in relation to a general partner, means the address for the time being shown in the register as the address of the general partner’s current principal office;
‘registered service address’, in relation to a general partner, means the address for the time being shown in the register as the general partner’s current service address.
(3) The regulations
may authorise or require the address to be changed on the
registrar’s own motion or on an application by another
person.
(4) The
regulations—
(a) may
include provision corresponding or similar to any provision that may be
included in regulations under section 1097B of the Companies Act
2006;
(b) must
include—
(i) provision about appeals corresponding to the provision that must be included in regulations under section 1097B by virtue of subsections (7) and (8) of that section;
(ii) provision corresponding to subsection (9) of that section.
(5) Regulations under
this section are subject to the affirmative resolution
procedure.”—
This amendment confers a regulation-making power to enable the registrar to change the registered service address or principal office address of a general partner in a limited partnership.

Question proposed, That the clause, as amended, stand part of the Bill.

Laurence Robertson: With this it will be convenient to consider clauses 112, 113 and 115 stand part.

Kevin Hollinrake: Under current legislation, general partners are required to notify the registrar of changes to partners or partner information. Clause 111 clearly sets out what information must be kept up to date on the register and places responsibility on general partners to notify the registrar of changes. They will commit an offence and be liable for a substantial fine in instances of non-compliance. Clause 111 goes further, stating that general partners who join limited partnerships after registration must notify the registrar within 14 working days of their appointment. Otherwise, they are prohibited from managing the business.
Clause 112 requires that general partners of limited partnerships registered prior to the commencement of this Bill provide the information set out in clause 111 within a six-month transition period. If the required information is not submitted within this period, the Registrar may reasonably conclude the limited partnership is dissolved and consider taking steps towards deregistering it. Clause 113 requires that new general partners of limited partnerships that were registered prior to the commencement of this Bill must inform the Registrar who their managing officers or named contacts are, or to confirm that they do not have any managing officers. Again, there is a six-month transition period during which this information must be provided.
Clause 115 creates a more robust offence for failing to provide requested information to the registrar, replacing the existing offence with a stiffer penalty. The current penalty of a £1 daily fine on each of the general partners, set back in 1907 when the original legislation was passed, is an insufficient deterrent. The new penalty may be applied if the general partners fail to inform the registrar of changes to a limited partnership’s name, place of business, nature and character of business, or capital contributions by partners occurring after application but before registration.

Margaret Hodge: This batch of clauses we are considering introduces a range of penalties. Does the Minister agree that the use of those penalties should be part of the annual report to Parliament?

Kevin Hollinrake: The right hon. Lady makes a fair point. As I said earlier, that is the kind of information I would like to see reported, so that Parliament and the public can see activities surrounding the legislation and the regulations clearly and ensure that Companies House is doing its job. There should be a proper conversation with members of the Committee, the wider House, officials and indeed Companies House to determine what the appropriate measures should be, but the key thing is not the measures, but the outcomes. I think the right hon. Lady, like me, would be very happy if no penalties were applied, as long as our system was 100% clean. That is what we are aiming for, and ideally it is what our measures will achieve; to me, that is the most important thing.

Question put and agreed to.

Clause 111, as amended, accordingly ordered to stand part of the Bill.

Clauses 112 and 113 ordered to stand part of the Bill.

Clause 114 disagreed to.

Clause 115 - Notification of other changes

Amendment made: 31, in clause 115, page 99, line 1, leave out
“10A (inserted by section 114 of this Act)”

and insert “10”.—(Kevin Hollinrake.)
This amendment is consequential on Amendment 30.

Clause 115, as amended, ordered to stand part of the Bill.

Clause 116 - Confirmation statements

Kevin Hollinrake: I beg to move amendment 32, in clause 116, page 102, leave out lines 6 and 7.
This amendment means that new section 10E of the Limited Partnerships Act 1907 (confirmation statements) will apply to Scottish limited partnerships. As a consequence, Amendment 33 leaves out the power in clause 117 to amend existing provision about confirmation statements for Scottish limited partnerships.

Laurence Robertson: With this it will be convenient to discuss the following:
Government amendment 33.
Clauses 116 and 117 stand part.

Kevin Hollinrake: To aid understanding of the amendments, I will first explain clauses 116 and 117, which they amend. It is essential that the registrar and the public can be assured that the information held on the register concerning limited partnerships is accurate and up to date. Scottish limited partnerships already supply some of that information through a confirmation statement.
Clause 116 introduces a similar requirement for all limited partnerships, irrespective of the jurisdiction of their registration, to confirm that the information held about them on the register is current. It will also ensure   that limited partnerships that are registered prior to commencement of the Bill provide a confirmation statement within six months. Limited partnerships that wish to update the registrar on a more frequent basis will be permitted to do so by notifying the registrar. Given that it is critical for the register to be up to date, general partners of limited partnerships that fail to deliver their confirmation statement will commit an offence. SLPs already submit confirmation statements to the registrar concerning the information held about them and their beneficial owners. That is a requirement under the Scottish Partnerships (Register of People with Significant Control) Regulations 2017.
Clause 117 gives the Secretary of State the ability to make regulations that could change the 2017 regulations to bring them into alignment with the requirements for limited partnerships in other parts of the UK. However, amendments 32 and 33 further refine the legislative approach; they are consequential on the Government’s decision to add a new power via amendment to make regulations governing qualifying Scottish partnerships, which the Committee will debate later. The Government anticipate that the new qualifying Scottish partnerships power will eventually be used to replace the 2017 regulations. As such, the power that was originally included in clause 117 is no longer needed, and amendment 33 therefore removes it.
Amendment 32 has the effect of ensuring that the core provisions about limited partnerships’ confirmation statement obligations are all contained in the Limited Partnerships Act 1907. The new regulation-making power in new section 10E will be used to ensure that for Scottish limited partnerships, the confirmation statement requirements will additionally contain the reporting duties around persons of significant control that are currently contained in the 2017 regulations.

Seema Malhotra: I may not have indicated clearly that I wished to speak earlier, Mr Robertson, and that may be why I was not called to speak in the clause stand part debate for clauses 111 to 115. Nevertheless, my speeches were not going to be long ones, so we will move forward.
We are generally supportive of clauses 116 and 117. Clause 116 inserts new sections into the Limited Partnerships Act 1907 to assist in keeping the register up to date and places a requirement on limited partnerships to deliver statements to the registrar specifying what changes have been made to the partnerships that must be delivered to the registrar within 14 days of every review period, which is every year from the date the limited partnership was registered. We welcome the clause as a necessary provision to maintain the accuracy of the register in relation to limited partners.
Amendment 32 means that new section 10E of the Limited Partnerships Act, on confirmation statements, will apply to Scottish limited partnerships. As a consequence, amendment 33 leaves out the power in clause 117 to amend existing provision about confirmation statements for Scottish limited partnerships. We support clauses 116 and 117 and the Government amendments.

Amendment 32 agreed to.

Clause 116, as amended, ordered to stand part of the Bill.

Clause 117 - Confirmation statements: Scottish partnerships

Amendment made: 33, in clause 117, page 103, line 2, leave out from beginning to “(review” in line 17 and insert—

“In regulation 37 of the Scottish Partnerships (Register of People with Significant Control) Regulations 2017 (S.I. 2017/694)”.—(Kevin Hollinrake).
See Member’s explanatory statement for Amendment 32.

Clause 117, as amended, ordered to stand part of the Bill.

Clause 118 - Power for HMRC to obtain accounts

Question proposed, That the clause stand part of the Bill.

Kevin Hollinrake: Limited partnerships are tax transparent, meaning that the individuals that are part of the limited partnership pay tax, rather than the limited partnership itself. In many cases, the partners of a limited partnership will pay tax in the UK, either because they are individuals who pay income tax or because they are corporate entities that pay corporation tax. Where the partners are UK corporate entities, they will also provide accounting information to the registrar. However, there are some limited partnerships whose partners do not pay tax in the UK or which are not legally required to provide accounting information to the UK Government.
The clause will give the Secretary of State the power to make regulations that require the general partners of UK-registered limited partnerships to provide accounting information to HMRC, closing the current gap. General partners who do not comply with that requirement will commit an offence and be liable to a fine or imprisonment.

Margaret Hodge: That sounds like a good idea, but HMRC is absolutely hopeless at using such powers. Time and again with these limited partnerships where scandals have emerged, it appears companies have told HMRC that they are dormant. They have not submitted accounts, and HMRC never checks up on them. What steps will the Minister take to make sure that those useful powers are used?

Seema Malhotra: I thank my right hon. Friend for her remarks. The clause is extremely important for HMRC, providing clarity around accounts and accounting  information and what tax should be due. It gives HMRC powers to request information and inserts a new section into the Limited Partnerships Act 1907 to create a new power for the Secretary of State to make regulations that require general partners to prepare accounts and, on request, make accounting information available to HMRC.
We very much support the measure. We want enhanced powers for HMRC to help with the detection and prevention of economic crime, and indeed the paying of rightful tax through better accounting information and submission of tax returns. I support the question that my right hon. Friend the Member for Barking asked about how we can ensure that HMRC uses the powers in a useful way.

Kevin Hollinrake: The right hon. Member for Barking went to a very tough school. She is not an easy person to please. Quite rightly, she is very demanding of more action in various areas; I support that, as she knows. HMRC is not directly answerable to BEIS. It reports to the Treasury, of course.

Liam Byrne: It is a law unto itself.

Kevin Hollinrake: The right hon. Gentleman knows that very well. I agree about enforcement, but I question the right hon. Lady’s language a little bit. She implied that HMRC is useless in certain contexts. I have met Jim Harra and other people from HMRC and found them to be diligent, decent people seeking to do the right job. The vast majority of people in any agency—officials, or whoever—do not go to work to do a bad job, so I think the language she used is not helpful.
We do need to beef up enforcement in all sectors, whether we are talking about tax avoidance, evasion or economic crime, and I absolutely support that. We see time and again that the return on investment from the extra enforcement capability is more than worth while for the taxpayer. I appreciate the spirit of the right hon. Lady’s remarks but not some of the language around them. Certainly, enforcement in all areas is something we need to look at carefully.

Question put and agreed to.

Clause 118 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Scott Mann.)

Adjourned till Thursday 17 November at half-past Eleven o’clock.
ECCTB 11 City of London Police
ECCTB 13 The Payments Association
ECCTB 14 Letter from Tom Tugendhat MP, Security Minister, Home Office, dated 8 November 2022, re: further Government Amendments
ECCTB 15 Law Society of Scotland
ECCTB 16 UK Finance
ECCTB 17 Global Legal Entity Identifier Foundation (GLEIF)
ECCTB 18 United Services Institute for Defence and Security Studies (RUSI)